P. H. Glatfelter Company (Form: 8-K)

York, PA, February 14, 2006: Glatfelter (NYSE: GLT) today reported net income of $26.9 million, or $0.61 per diluted share, for the fourth quarter of 2005, compared to $19.3 million, or $0.44 per diluted share, in the fourth quarter of 2004. The current year’s quarterly results include after tax gains totaling $22.8 million, or $0.51 per diluted share, from the sale of timberlands and insurance recoveries as well as after-tax restructuring charges totaling $1.0 million, or $0.02 per diluted share. The fourth quarter of 2004 results include gains from timberland sales aggregating $13.6 million, or $0.31 per diluted share, after tax, and a restructuring charge totaling $2.0 million, or $0.04 per diluted share, after tax. Excluding these items from each quarter’s results, adjusted earnings (which are reconciled to net income in the accompanying financial tables) were $5.2 million, or $0.12 per diluted share in the fourth quarter of 2005, compared with $7.7 million, or $0.17 per diluted share in the year-earlier quarter.

Operating income in the Specialty Papers business unit totaled $2.0 million in the fourth quarter of 2005 compared with $4.0 million in the same quarter a year ago. The benefits of stronger pricing conditions and demand across most markets were more than offset by higher input costs. Long Fiber & Overlay Papers’ operating income declined $2.3 million to $3.2 million in the quarter-to-quarter comparison primarily due to higher input costs and softer pricing in this business unit’s key markets.

“We experienced strong growth in our Specialty Papers business unit during the quarter,” said George H. Glatfelter II, Chairman and Chief Executive Officer. “Volume in this business increased 8% led by a very strong 21% increase in Engineered Products. Our new product development capabilities resulted in the scale-up of several new business opportunities and we expect this progress to continue. While Specialty Papers’ fourth quarter results were lower than a year ago, we are becoming more optimistic about the first half of 2006.”

“In addition, despite a difficult business climate in certain of Long Fiber & Overlay Papers’ markets that resulted in substantial market-related downtime, we are beginning to see indications of improvement in this unit’s key markets,“ added Mr. Glatfelter.

Net sales totaled $143.2 million for the fourth quarter of 2005, an increase of 2.7% compared to the same quarter a year ago. In the Company’s Specialty Papers business unit, net sales increased $9.2 million, or 11.0%, consisting of an 8.2% increase in volume and $2.3 million attributable to higher product pricing. Net tons shipped in the quarter-to-quarter comparison were particularly strong in this unit’s engineered products and envelope & converting markets, which generated volume growth of approximately 21% and 7%, respectively. Long Fiber & Overlay Papers’ shipments increased approximately 4% and selling prices declined $1.5 million on a constant currency basis in the quarter-to-quarter comparison.

Costs of products sold increased $9.9 million, to $122.4 million, compared to the same quarter a year ago. The increase was primarily due to higher net tons shipped, $3.8 million attributable to higher costs of fiber, other raw materials and energy, as well as higher maintenance costs. Further, the Company experienced market-related downtime during the fourth quarter of 2005 approximating 8% of the production capacity of its Long Fiber & Overlay Papers business unit. Gross profit declined to $23.1 million for the fourth quarter of 2005 compared to $28.8 million in the year earlier quarter.

During the fourth quarter of 2005, the Company began to implement its European Restructuring and Optimization Program (“EURO Program”), a comprehensive series of actions designed to improve the operating performance of the Long Fiber & Overlay Papers business unit. Restructuring charges in the current quarter associated with this program totaled $1.6 million, pre tax, and were for severance and related benefits associated with the elimination of certain positions at the Gernsbach, Germany facility.

Sales of timberlands completed during the quarter consisted of 2,488 acres for $21.0 million in cash. In the year ago quarter, the Company completed the sale of 2,400 acres of timberlands for $23.5 million in cash. These transactions resulted in a pre-tax gain of $20.3 million and $23.0 million, respectively.

The Company also successfully resolved certain claims under insurance policies related to the Fox River environmental matter. Insurance recoveries included in the 2005 fourth quarter’s results totaled $18.0 million and have been fully received in cash.

The Company’s effective tax rate for the fourth quarter of 2005 and 2004 was 36.9% and 36.2%, respectively. The effective tax rate on adjusted earnings for the fourth quarter of 2005 and 2004 was 14.3% and 24.8%, respectively.

For the full year of 2005, net income totaled $38.6 million or $0.87 per diluted share, compared to $56.1 million and $1.27 per diluted share, respectively, in 2004. The reported results for the full year 2005 include after tax gains totaling $24.0 million, or $0.54 per diluted share, from insurance recoveries and the sale of timberlands, as well as restructuring charges totaling $1.0 million, or $0.02 per diluted share, after-tax. The results for 2004 benefited from after-tax gains totaling $55.5 million, or $1.26 per share, from sales of timberlands and the corporate aircraft and from insurance recoveries. Restructuring charges in 2004 totaled $12.7 million, after-tax, or $0.29 per diluted share. Excluding these items from each year’s results, adjusted earnings (which are reconciled to net income in the accompanying financial tables) were $15.6 million, or $0.35 per diluted share, in 2005 compared with $13.4 million, or $0.30 per diluted share a year ago.

Commenting on the near term outlook, Mr. Glatfelter stated, “Heading into 2006, we are seeing strong demand for our Specialty Papers products and prices in many of these markets are strengthening. At the same time, high input costs, that in certain instances continue to rise, reflect an ongoing concern. We are keenly focused on addressing the challenges facing our Long Fiber & Overlay Papers business. We have begun to see indications of improving demand for this unit’s products, particularly in the Food & Beverage markets. However, sluggish economic conditions and an imbalance of supply and demand in our Composite Laminates markets will continue to adversely impact the overall performance of this business unit. As part of the EURO Program, we are implementing a significant workforce efficiency plan at each of our European facilities. Together with other aspects of the EURO Program, we expect to achieve step-change improvement in our cost structure from these efforts which will approximate $7 million to $9 million annually, by 2008.”

The Company recently completed an extensive study to determine the optimum approach for managing its timberlands in a way that creates the greatest value for its shareholders. The study considered many factors including, among others, land valuations, external and internal wood costs and future fiber requirements. The Company concluded that the most advantageous approach is to sell all 40,000 acres of higher and better use (“HBU”) properties in an orderly fashion. In some cases, low cost, low risk opportunities may exist to add value to some of these acres through entitlements. It is estimated that the cost of fiber will increase by approximately $0.03 to $0.06 cents per share annually when the entire 40,000 acres are sold but that the benefit from the proceeds will far outweigh this increased cost. For the present, the Company intends to retain the pure timberland properties to mitigate the cost of replacing internally generated wood with outside sources. Execution of the Timberland Strategy is expected to take approximately three to five years to complete and is estimated to provide pre-tax cash proceeds of approximately $150 million to $200 million, assuming, among other factors, acceptable market conditions and a carefully executed plan of disposition.

Mr. Glatfelter stated, “We continue to approach our business in a fiscally disciplined manner and further monetization of our timberland assets will allow us to create additional benefit for our shareholders, maintain our strong balance sheet, and generate increased flexibility for value creation.”

Headquartered in York, Pennsylvania, Glatfelter is a global manufacturer of specialty papers and engineered products. U.S. operations include facilities in Spring Grove, PA and Neenah, WI. International operations include facilities in Germany, France and the Philippines and an office in China. Glatfelter’s common stock is traded on the New York Stock Exchange under the ticker symbol GLT.

Caution Concerning Forward-Looking Statements This document includes certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Although the Company makes such statements based on assumptions that it believes to be reasonable, there can be no assurance that actual results will not differ materially from the Company’s expectations. Actual results may differ materially from these expectations due to changes in, among others, industry conditions, demand for or pricing of its products, circumstances surrounding the Neenah facility and former Ecusta Division, and global political, economic, business, competitive, market, and tax legislation; continued successful execution of the North American Restructuring Program and the EURO Program, growth strategies and cost reduction initiatives; successful execution of the Timberland Strategy with acceptable market conditions; and other regulatory factors. More information about these factors is contained in Glatfelter’s filings with the U.S. Securities and Exchange Commission.

As previously announced, the Company will hold a conference call today at 11:00 AM (Eastern) to discuss its fourth quarter results. Interested persons who wish to hear the conference call webcast live should go to the Company’s Investor Relations web page at www.glatfelter.com/e/invesstock.asp and allow a sufficient amount of time before the start of the conference to register and download any necessary audio software. You may also participate by calling 877-692-2590 (conference ID 6920670) at 10:55 AM (Eastern) on February 14, 2006. A taped replay of the conference call will be available within two hours of the conclusion of the call and until February 21, 2006. To access the taped replay, call 877-519-4471 and enter conference PIN 6920670.

This press release, which includes financial information to be discussed by management during the conference call discussed above and disclosure and reconciliation of non-GAAP financial measures, is available in the “Earnings Releases” subsection of the “Investor Relations” section of the Company’s web site, www.glatfelter.com.

P. H. Glatfelter Company and subsidiaries
Consolidated Statements of Income
(unaudited)


	Three Months Ended December						Year Ended December 31
	31
In thousands, except per share	2005			2004			2005			2004
Net sales	$	143,162		$	139,343		$	579,121		$	543,524
Energy sales – net		2,405			2,029			10,078			9,953

Total revenues		145,567			141,372			589,199			553,477
Costs of products sold		122,434			112,541			492,023			461,063

Gross profit		23,133			28,831			97,176			92,414
Selling, general and administrative expenses		15,208			14,763			67,633			59,939
Restructuring charges		1,564			3,000			1,564			20,375
Gains on dispositions of plant, equipment and timberlands, net		(20,645	)		(22,615	)		(22,053	)		(58,509	)
Gains from insurance recoveries		(17,951	)		–			(20,151	)		(32,785	)

Operating income		44,957			33,683			70,183			103,394
Nonoperating income (expense)
Interest expense		(3,202	)		(3,396	)		(13,083	)		(13,385	)
Interest income		480			672			2,012			2,012
Other – net		499			(743	)		1,028			(1,258	)

Total other income (expense)		(2,223	)		(3,467	)		(10,043	)		(12,631	)

Income before income taxes		42,734			30,216			60,140			90,763
Income tax provision		15,787			10,942			21,531			34,661

Net income	$	26,947		$	19,274		$	38,609		$	56,102

Earnings Per Share
Basic	$	0.61		$	0.44		$	0.87		$	1.28
Diluted		0.61			0.44			0.87			1.27


Three months ended December 31
In thousands, except net tons sold	Specialty Papers				Long Fiber & Overlay				Other and Unallocated						Total
	2005		2004		2005		2004		2005			2004			2005			2004
Net sales	$	93,196	$	83,952	$	49,954	$	55,345	$	12		$	46		$	143,162		$	139,343
Energy sales, net		2,405		2,029		–		–		–			–			2,405			2,029

Total revenue		95,601		85,981		49,954		55,345		12			46			145,567			141,372
Cost of products sold		83,468		73,114		42,638		43,374		30			26			126,136			116,514

Gross profit (loss)		12,133		12,867		7,316		11,971		(18	)		20			19,431			24,858
SG&A		10,091		8,833		4,086		6,486		1,448			(209	)		15,625			15,110
Pension income		–		–		–		–		(4,119	)		(4,320	)		(4,119	)		(4,320	)
Restructuring charges		–		–		–		–		1,564			3,000			1,564			3,000
Gains on dispositions of plant, equipment and timberlands, net		–		–		–		–		(20,645	)		(22,615	)		(20,645	)		(22,615	)
Gain on insurance recoveries		–		–		–		–		(17,951	)		–			(17,951	)		–

Total operating income (loss)		2,042		4,034		3,230		5,485		39,685			24,164			44,957			33,683
Non-operating income (expense)		–		–		–		–		(2,223	)		(3,467	)		(2,223	)		(3,467	)

Income before income taxes	$	2,042	$	4,034	$	3,230	$	5,485	$	37,462		$	20,697		$	42,734		$	30,216

Supplementary Data
Net tons sold		109,701		101,371		12,488		12,016		8			20			122,197			113,407
Depreciation expense	$	8,949	$	8,599	$	3,512	$	3,430		–			–		$	12,461		$	12,029


Year ended December 31
In thousands, except net tons sold	Specialty Papers					Long Fiber & Overlay				Other and Unallocated						Total
	2005		2004			2005		2004		2005			2004			2005			2004
Net sales	$	380,923	$	337,436		$	198,137	$	205,232	$	61		$	856		$	579,121		$	543,524
Energy sales, net		10,078		9,953			–		–		–			–			10,078			9,953

Total revenue		391,001		347,389			198,137		205,232		61			856			589,199			553,477
Cost of products sold		340,629		312,136			166,153		163,843		84			1,021			506,866			477,000

Gross profit (loss)		50,372		35,253			31,984		41,389		(23	)		(165	)		82,333			76,477
SG&A		39,876		36,617			21,282		23,067		8,149			1,660			69,307			61,344
Pension income		–		–			–		–		(16,517	)		(17,342	)		(16,517	)		(17,342	)
Restructuring charges		–		–			–		–		1,564			20,375			1,564			20,375
Gains on dispositions of plant, equipment and timberlands, net		–		–			–		–		(22,053	)		(58,509	)		(22,053	)		(58,509	)
Gain on insurance recoveries		–		–			–		–		(20,151	)		(32,785	)		(20,151	)		(32,785	)

Total operating income (loss)		10,496		(1,364	)		10,702		18,322		48,985			86,436			70,183			103,394
Non-operating income (expense)		–		–			–		–		(10,043	)		(12,631	)		(10,043	)		(12,631	)

Income before income taxes	$	10,496		($1,364	)	$	10,702	$	18,322	$	38,942		$	73,805		$	60,140		$	90,763

Supplementary Data
Net tons sold		450,900		421,504			47,669		48,528		24			390			498,593			470,422
Depreciation expense	$	35,781	$	37,186		$	14,866	$	14,412		–			–		$	50,647		$	51,598

Results of individual business units are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to accounting principles generally accepted in the United States of America; therefore, the financial results of individual business units are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the business units. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. The costs incurred by support areas not directly aligned with the business unit are allocated primarily based on an estimated utilization of support area services or included in “Other and Unallocated” in the table above. Certain prior period information has been reclassified to conform to the current period presentation.

Management evaluates results of operations before non-cash pension income, restructuring related charges, unusual items, effects of asset dispositions and insurance recoveries because it believes this is a more meaningful representation of the operating performance of its core papermaking businesses, the profitability of business units and the extent of cash flow generated from core operations. This presentation is closely aligned with the management and operating structure of our company. It is also on this basis that the Company’s performance is evaluated internally and by the Company’s Board of Directors.


	Year Ended December 31
In thousands	2005			2004
Cash Flow Data
Cash provided (used) by:
Operating activities	$	41,765		$	39,584
Investing activities		(6,954	)		42,109
Financing activities		(15,130	)		(59,753	)
Depreciation, depletion and amortization		50,647			51,598
Capital expenditures		29,949			18,587
December 31				December 31
		2005			2004

Balance Sheet Data
Cash and cash equivalents	$	57,442		$	39,951
Total assets		1,044,977			1,052,270
Total debt		207,073			211,226
Shareholders’ equity		432,312			420,370

This press release includes a discussion of earnings before the effects of certain specifically identified items. Management believes that such adjusted earnings are useful to investors as the impact on reported results of certain transactions are identified including, if applicable, strategic asset sales, insurance recoveries and unusual or nonrecurring charges that are specifically identified with strategic initiatives or other unique facts and circumstances. In addition, adjusted earnings represent one measurement used by management and by the Company’s Board of Directors to measure operating performance. The following tables set forth a reconciliation of results determined in accordance with accounting principles generally accepted in the United States of America to adjusted earnings discussed herein.


	Three Months Ended December 31
	2005						2004
In thousands, except per share amounts	After tax income			EPS			After tax income			EPS

Net income	$	26,947		$	0.61		$	19,274		$	0.44
Timberland sales		(11,517	)		(0.26	)		(13,558	)		(0.31	)
Insurance recoveries		(11,289	)		(0.25	)		–			–
Restructuring charges		1,017			0.02			1,950			0.04
Adjusted earnings	$	5,158		$	0.12		$	7,666		$	0.17


	Year Ended December 31
	2005						2004
In thousands, except per share amounts	After tax income			EPS			After tax income			EPS

Net income	$	38,609		$	0.87		$	56,102		$	1.27
Timberland and aircraft sales		(11,258	)		(0.26	)		(34,151	)		(0.78	)
Insurance recoveries		(12,719	)		(0.29	)		(21,310	)		(0.48	)
Restructuring charges		1,017			0.02			12,723			0.29
Adjusted earnings	$	15,649		$	0.35		$	13,364		$	0.30

The sum of individual per share amounts set forth above may not agree to adjusted income per share due to rounding.

Good morning, ladies and gentlemen. My name is Janelle, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Glatfelter fourth quarter earnings conference call.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer period. If you would like to ask a question during that time please press star, then the number one on your telephone keypad. If you would like to withdraw your question at any point please press the pound key.

I’d like to turn the call over to your host, [Glenn Davies]. Sir, you may begin.

Thank you. Good morning, and welcome to Glatfelter’s 2005 fourth quarter earnings conference call. My name is Glenn Davies. I’m with the Company’s Corporate Finance Group.

On the call with me this morning is George Glatfelter, our Chairman and CEO, John van Roden, Executive Vice President and Chief Financial Officer, and Dante Parrini, our Executive Vice President and Chief Operating Officer.

A few comments before we begin. During today’s call we will be referring to adjusted earnings and adjusted earnings represent earnings before the affects of certain items, and this is considered to be a non-GAAP financial measure. In our release this morning, we included a reconciliation of adjusted earnings to our GAAP results, together with a description of why we used adjusted earnings. This earnings release is available on our investor relations page of the web site, glatfelter.com.

I’d like to remind you that any statements made today with regards to our future expectations may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to our 2004 Annual Report filed with the SEC for important factors, that among others, could cause actual results to differ from any results which might be projected, forecasted, or estimated in any such forward-looking statement.

Thanks, Glenn. Good morning, everyone, and welcome. I hope that you’ve had an opportunity to review the earnings release that we issued earlier this morning.

In the current quarter, excluding nonrecurring items, we earned $0.12 per share compared with $0.17 per share in the same quarter of 2004. I’ll offer a few comments on our performance this quarter. Our specialty papers business unit exhibited strong top line performance compared to a year ago. This unit experienced both strong volume and an improved pricing environment. We continue to generate growth in higher value niche markets, driven by new product development activities.

During earlier calls we had discussed the challenges facing our long fiber and overlay business unit. Although these challenges are still present we’re seeing indications of improvement. This unit’s performance in the fourth quarter of 2005 improved substantially on a sequential quarter comparison, reflecting successful business development and the seasonal strength of the food and beverage market segment.

This quarter also included several other significant events, including the collection of $18 million of insurance proceeds related to the Fox River matter, a $21 million sale of timberland, and the announcement of our timberland strategy, and the implementation of the Euro Program and announcement of expected annual savings totaling $7 to $9 million. I’ll provide further comments on these initiatives later in the call.

Our performance throughout all of 2005 reflects successful focus on a few things that matter most to our Company. First, taking a very aggressive approach to managing our cost structure, as evidenced by the success of our North American Restructuring Program, and as I just mentioned, implementation of the Euro Program.

Secondly, the success of our new product development initiatives in driving growth in high value niche markets. This success is demonstrated by total volume growth in specialty papers of 7% through the year, five years of double-digit growth in engineered products, improving market share in book publishing, and volumes in food and beverage that are up 1% in 2005, continuing very strong performance for this product line in the year 2004.

The final thing that matters most to us is maintaining a strong balance sheet. During 2005 our net debt declined approximately $22 million, and since 2004 we’ve reduced net debt by $89 million.

I would like John van Roden to provide some additional comments on our financial performance, before I ask Dante to comment on the performance of our business unit. I’ll then come back on and provide some concluding remarks before we take your questions. John.

Today we reported net income for the fourth quarter of 2005 of $26.9 million or $0.61 per share compared to $19.3 million of $0.44 per share in the same quarter a year ago. Our earnings release discusses certain nonrecurring items that affected each quarter’s results. When these items are excluded from reported results, adjusted earnings in the fourth quarter of 2005 are $5.2 million or $0.12 per share compared with $7.7 million or $0.17 per share in the same period of 2004.

Overall, the primary drivers of the change of earnings on this basis in the quarter to quarter comparison were lower operating incomes for specialty papers which reduce EPS by $0.03 and lower operating income for long fiber and overlay that reduced earnings by $0.03.

Operating income in the specialty papers business unit declined $2 million in the quarter over quarter comparison to $2 million in the fourth quarter of 2005. Although both shipping volumes and prices favorably impacted the comparison, higher input and other operating costs offset these factors.

In long fiber and overlays operating income totaled $3.2 million, a decline of $2.3 million from the fourth quarter of 2004. Lower product prices in this business unit reduced EPS by approximately $0.02 and higher raw material and energy costs and the impact of downtime reduced our EPS by approximately $0.03. These unfavorable items were partially offset by lower SG&A spending.

Our consolidated gross margin narrowed to 16% in the current quarter compared to 20% last year. This largely reflects the impact of rising input costs and downtime in long fiber and overlay. Our balance sheet is in very good shape, with net debt to capital at 25.5%. As George stated, we have significantly reduced net debt outstanding over the past two years.

During the quarter we completed an additional sale of timberlands, as well as the insurance proceeds from the Fox River. Aggregate proceeds from these transactions totaled 38.9 million. Later in the call George will provide comments for additional timberland sales.

I’d now like to ask Dante to provide an overview of our business units’ performance.

Thank you, George, and good morning. I’ll provide comments on the performance of our business operations for the fourth quarter of 2005. Let’s start with long fiber and overlay.

As you might recall, this business is a world leader in the manufacture of high quality filter papers for the food and beverage markets, overlay papers for the composite laminate industry, premium quality metallized labels, label papers, and niche technical specialties.

Fourth quarter and 2005 net sales were approximately 10% behind the same quarter a year ago, which is largely due to weaker results from our food and beverage and composite laminate product lines and lower selling prices across most product lines. Unit volumes overall were up by approximately 4% in the quarter to quarter comparison. Volumes were down 6% in our larger food and beverage segment primarily due to weaker coffee demand and aggressive competition. Keep in mind that the fourth quarter of 2004 was an all-time high for teabag paper shipments. For the full year 2005 food and beverage volumes were slightly above 2004 levels.

Shipments in all other segments were up in the comparison. We did experience market driven downtime approximating 8% of business unit capacity primarily driven by weak demand and strong competition in the overlay paper segment in Europe. Although market indicators are improving, as we head into 2006 we do expect some market related downtime associated with soft demand for composite laminates.

Now, a few words on near-term demand and pricing outlook. Food and beverage is in its seasonal strong period and order backlogs are quite strong for the teabag business. Near-term demand for overlay products in Western Europe remain slow, as previously mentioned, although we are beginning to see some indications of improvement. And sales of metallized papers will be slow during the winter as bottled beer consumption in Europe typically declines.

From a pricing standpoint, we anticipate relatively stable prices with price increases expected for our food and beverage products. As discussed in this morning’s release we are implementing our Euro Program which is designed to improve the long fiber and overlay paper’s performance. George will speak to this during his closing remarks.

Now, let’s move on to our specialty papers business unit, that includes three major market segments, those being book publishing papers, envelope and converting papers, and engineered products.

For the fourth quarter net sales were up approximately 11% and volumes were up 8% versus the same quarter a year ago. Net sales were influenced primarily by higher volumes shipped in both engineered products and in envelope and converting, as well as improved pricing.

Now, we’ll offer more specific comments by market segment. Book publishing, revenues were up 3%. Unit volumes were essentially flat in the quarterly comparison. For the year volumes in our core, trade book, and education book papers grew by 22% versus 2004. Envelope and converting papers, revenues were up 10% which reflects improved pricing in the white papers market. Unit volumes were up 7% in the quarterly comparison, and for the year envelope volume grew by 5% versus 2004.

Engineered products, revenues were up 22% and unit volumes were once again very strong, up 21% from the fourth quarter last year and 18% in the YOY comparison. This is driven by the continued successful execution of our plan to grow in uncoated specialties.

As for near-term demand and pricing outlook, our backlogs are strong and we expect strong demand across all three segments. We successfully implemented price increases for white papers in early January, we are implementing price increases across a number of our engineered product segments, and today we announced a price increase for trade book papers effective March 13th.

Now, I’d like to shift to new product development. During the fourth quarter, approximately 53% of our net revenue came from products less than five years old, and for the year, 52% of our net revenue came from new products. This level of performance is consistent with our target of 50% through the cycle. This was a significant accomplishment given the hurdle for 2005 was increased by nearly $100 million due to products that rolled out of this metric as they reached their five-year anniversary date.

As for mill operations, the North American mills ran relatively well during the fourth quarter, although we did have higher than normal maintenance costs at our domestic operations. In addition, the European mills felt the impact of some market related downtime.

To summarize, our fourth quarter performance was mixed, although we are encouraged by many of the indicators as we head into 2006.

In the specialty papers business unit demand remains strong across each of this unit’s markets and prices are increasing. In this business unit we’re focused on two things, continuing our growth in high value products by leveraging our new product development expertise and aggressively managing our costs to lessen the impact of rising input costs.

The outlook for our long fiber and overlay papers is improving, however, as Dante indicated, there are many challenges ahead. During the fourth quarter of 2005 we successfully negotiated with the local labor representatives a significant workforce efficiency program at our Gernsbach, Germany Facility and we’re in the process of a similar effort in France.

We have finalized the remaining design aspects of the Euro Program. As a result of this comprehensive program we expect to achieve step change improvement in our cost structure, estimated to be $7 to $9 million annually by 2008. We expect that 2006’s results will benefit from approximately one-half of this amount. As several of you may know, this program is modeled after our successful North American initiative, and I’m confident we’ll achieve our objectives again.

Earlier in the month, we announced that John van Roden will be retiring from the Company at the end of the year. John will be relinquishing his CFO responsibilities effective June 30th, and he’ll be succeeded by our Vice President and Corporate Controller, John Jacunski.

In addition to transitioning his CFO responsibilities, John van Roden will be devoting a substantial portion of his time and energy to implementing our timberland strategy. We recently completed an extensive study of how best to maximize the value of our 81,000 acres of timberlands. The study considered many factors, including among others land valuations, external and internal wood costs and future fiber requirements.

As a result of this study, our timberlands strategy will be to sell over the next three to five years approximately 40,000 acres of higher and better use [HVU] property. We estimate these transactions will provide pretax cash proceeds of approximately $150 million to $200 million, assuming among other factors acceptable market conditions and a carefully executed plan of disposition.

Our analysis estimates the once the 40,000 HVU acres are sold the cost of fiber will increase by approximately $0.03 to $0.06 per share annually. However, we expect that the benefit from the proceeds will far outweigh this increased cost. For the present, the Company intends to retain the cured timberland properties to mitigate the cost of replacing internally generated wood with outside sources.

As you’ve just heard, we have a number of initiatives underway, while at the same time, we’re focused on our core business. We’re operating in a very challenging environment. Costs related to energy have risen substantially over the last two years. Our operations are impacted by higher energy costs through direct purchase of energy for our facilities, inbound and outbound freight, and the purchase of raw materials that have a high energy related cost component.

However, despite this challenging business environment we will remain focused on executing well the things that matter most to our business success. They are continuing to grow in high value niche markets. Taking a very aggressive approach to managing our cost structure and maintaining a strong balance sheet and using the flexibility provided by that asset to drive value for our shareholders.

I’d like to thank you for your participation in today’s conference call. And I’ll now turn the call back to Glenn.

At this time, we’d welcome any questions you may have, and I’d like to ask Janelle to provide instructions for this portion of the call. Thank you.

Thank you. George, I’ve got a few things. And for Dante, too. When you look at the new products you’ve clearly had a lot of success in coming up with a lot of new stuff. Can you give us a sense of your targets for new product margin versus old and how you’re doing against those targets, or how you think about it?

Sure, Mark. It’s Dante. We absolutely have hurdle rates that we establish for new products, and we have an internal target that has a favorable spread from a gross margin standpoint. As you can appreciate when you’re developing a new product there are a lot of dynamics in play, not the least of which of what’s happening externally, what happens with your key input costs. But in order for us to invest the energy and resources in developing and commercializing a product it needs to have a gross margin that is in excess of what we’re currently making and what we plan to displace.

And can you give us a sense of how you’re doing against those targets? I mean are you currently seeing a meaningful spread between new products and old or has that been compacted by what’s going on on the cost side?

That’s a good question. Up until this past year we had a favorable spread. We have seen some compression between existing products and new products over the past 12 months, that’s related to escalated input costs and the fact that we had nearly $100 million of pretty high margin new products reach their five-year anniversary as we entered into ’05. So, it raised the bar of the margin of all other products outside of the new product.

That’s not a terrible problem, though. Now, on the cost issue, you know, you’ve talked a lot about how you’re working on new stuff. Are there specific efforts underway? Are there projects underway to work on specific cost issues? Or is it more sort of a general clamping down?

This is Dante. We have very specific projects, a vast multitude of projects that are actively being managed as a portfolio of cost improvement and process improvement related initiatives. They span the gamut from workforce efficiency to improving our supply chain practices, different strategic sourcing methods, to improving our end-to-end business planning so that we have better synchronization from our forward look on demand with supply planning and inventory management.

And do you have a specific dollar target for this year you can share with us, or?

Well, you know, with the Euro Program, that’s the most high profile initiative, that as we stated today our target is $7 to $9 million US dollar improvement by the time we get to 1/1/2008 we expect half of that benefit to show-up in the ’06 P&L.

Okay, let me leave it there. Just one more question, we’ve talked in past calls about the health of the balance sheet and the possibility of looking at acquisitions. And I wondered if you could just reiterate for us what your acquisition targets would look like, and what it would take to get you moving in that direction relative to just focusing internally?

Sure, Mark. It’s George. We have had this conversation on a number of different calls, but I’ll revisit it. I’ll start by saying that it’s really easy to grow in this industry. What’s really tough is to grow well.

So, our view in terms of acquisition is a disciplined base view. If we were to be successful in an acquisition effort you can look for that acquisition to return the cost of capital, something that is pretty tough to do in this industry today. It would have to be accretive.

It would have to be in markets that it made sense, where we could leverage the current competencies of the existing facility. It would have to be geographically located in places of the world that we felt were a match or could be made a match with our current culture. The bottom line, it’s a disciplined approach and we will not deviate from that.

Hi, good morning, gentlemen. Good quarter here. Just a couple of questions. Wanted to just focus in a little bit on the land sale side. I guess we didn’t see included any of the pure timberlands or any intentions to sell that. Are your intentions to never sell that or is that just narrow your focus on the HBU land? And then I have a follow-up. Thanks.

Ian, this is John. No, I think George said in his comments, for the time being we’re going to focus on just selling the 40,000 acres of HBU. And by holding on to the pure timberlands it does basically give us an opportunity to keep our fiber costs down.

We would never say that we would never sell it all for the right price, but I think that the opportunity is so great that the 40,000 acres of HBU and the effort it takes to do that right, that’s what we’re going to focus on now.

And, John, I know you’re sticking around with the land for some time. Is it going to take this long to sell the land, are your intentions to stick around still, or you eventually going to turn the reins over to someone else?

Okay. And then a couple of other questions here. On the North American business, are we complete with the North American restructuring? And what were the total cost savings there?

And on the price increases, the white paper increases you put through in January, how sticky are they, how successful are they? And if you could give us the magnitude of the trade book price increases that are coming in March? Thanks.

Good morning, Ian. It’s Dante. I believe there are three questions there, and I’ll try to get them in order. The first was North American restructuring, the program is completed, and we publicly stated that we want to be at $15 to $20 million worth of financial benefit from that initiative. We were successful in getting the far upper end of that range.

The second question had to do with the stickiness of the white paper price increases that were implemented in January, and from our vantage point they’ve been quite sticky. And we have very strong backlogs, as well. And I see tightening backlogs in the white paper segment, so we’re rather pleased with the progress we’ve seen on the white paper front which for us impacts our envelope and converting business most significantly.

The last is the trade book increase, and we announced today a $50 per ton trade book increase, effective March 13th.

I don’t know that in the past we’ve disclosed segment volume, so I’m afraid I can’t get to that level of detail with you.

I wondered just going back to the land, is it possible to get some sense of where the 40,000 that you’re going to hold on to is, and where the 40,000 that you’re going to be selling is, because you’ve got land down in the [Del Marva], you’ve got land kind of south and I think west of Washington, D.C., and then you’ve got land in Pennsylvania?

Yes, Mark, this is John. About 50% of the land is in Virginia, 50% of the HBU we’re going to sell, and the other 50% is roughly equal between the two States, and Delaware.

Okay. John, is there any way that you guys could use any of these tax deferred note structures when you’re selling this, that defer some of the gain?

We have done in the past, Mark, as you probably know. And deferred tax doesn’t keep you from paying it, which is good from a cash flow standpoint but it doesn’t always give us the best deal. And so I think we always take that into consideration when we make a sale, but many of the buyers don’t want to do that, and we just lower prices. So, we’ll just have to take it on a case by case basis.

A reasonable approach. A couple of questions for Dante. Dante, I wondered if you can talk to us a little bit about the increase in the volume of your envelope business? You know, over time that’s a business you said you wanted to be shrinking, and it sounds like, you know, part of the volumes in this quarter was in that business.

And then, secondly, I wonder if you can give us a little bit of color inside that $7 to $9 million over in Europe, what the different elements are, and maybe specifically speak to sort of challenges in terms of reducing staffing levels in Europe?

Sure. First, I’ll go to the growth in the envelope and the various paper markets. And in the past I don’t know that we’ve explicitly stated we’re going to shrink our exposure there, but we’re a regional player in predominantly the East Coast, and there’s a good balance for the Spring Grove facility at a certain tonnage level of envelope, and so it tends to close a little bit. It can be plus or minus one or two percentage points of share in any given year.

And I think some of the consolidation that customer base in that space has observed was one very large commodity mill with a very significant share has created a little bit of discomfort of being overly exposed to one supplier that may, you know, exert their will. And the combination of our best in class service program, a lot of good work on the streets of customer relationships and product enhancements has created opportunities for us to expand our book and business and we took advantage of that.

The second question is around the 7 to 9 million in Euro, and similar to with our North American restructuring program, we didn’t itemize the economic value associated with each project, and we’re not intending to do that today. But it should come as no surprise that a large component of the economic value from the Euro program has to do with our workforce efficiency initiatives, both at our Gernsbach, Germany Facility and our Scaer, France Facilities.

And you did allude to the nuances and sensitivities of working through a workforce or staffing reductions in Europe, and that’s also why the timeline for the Euro Program is slightly more extended than the North American restructuring plan. We have had very good collaborative discussions with the Workers Council in Germany, which is equivalent of the union leadership here in the U.S. We are doing the same thing with our facilities in France. And we have a high level of confidence that we’ll be able to subscribe to our core values and still act in a way that’s responsible to the bottom line.

Okay. And then, finally, there’s just some stories out on the news services about you looking at mill operations out in the Midwest. I’m sure you don’t want to comment on specifics, but maybe to, you know, George, if you can give us any more color on, you know, any other criteria in terms of acquisitions, you know, whether you’re going to try to buy investment assets?

Thank you. And our next question is coming from Bruce Wilcox of Cumberland Associates.

Good morning, everybody. Just a few little nits and gnats. Are you finished with your Fox River recovery?

Yes, Fox River is an ongoing process, Bruce. I would tell you that at this point in time we’re out of the River, simply because the River is frozen over. The cleanup, as you might be aware, is pretty complex. And, you know, we’re continuing evaluation of a number of different alternatives.

With respect to the insurance coverage that we received, it’s safe to say that we have received virtually all of the payments that we had anticipated. There are no material payments to follow.

Okay. And then what is your forecast capital budget exclusive of any, you know, kind of unusual items, like an acquisition for ’06? And what do you consider your sustaining capital expenditure level to be?

Okay. And then a last one. Are there – you’ve been doing a tremendous amount of, you know, review of the timberland, lots of restructuring, and I’m just kind of guessing that that probably inflates your G&A line a little bit. And can you give us some guidance either as to absolute dollars or percent of revenue that you would aspire to for a normalized G&A?

Well, there are some costs in this year’s G&A which are basically outside legal costs for Ecusta and so forth, that we hope are not there in the future. But I’d say something in the 10% range would be about right, and it’d be great if it was less than that.

Yes, hello. Does the sales of the land, the $150 to $200 million, is that based on today’s prices, or does that include any assumption of an increase in land prices over time?

Those are – that range that we gave you is based on an appraisal or appraisals that we had done on every parcel we own. And on those appraisals we got a range which we put into this total. And it’s based on a planned sale of the property over several years, so if we had to sell all at once I doubt that we would get that.

Okay. And you say that the proceeds will more than offset the higher costs of fiber, how do you plan to reallocate the proceeds to increase earnings on the debt reductions or share repurchases or something else?

Well, I think the answer to that question is yes. We’ll continue to look at what the best way is to return value to shareholders and make the appropriate decisions.

You say that your – the specialty papers results in the fourth quarter were below a year ago, yet your volume and prices were quite strong. What is hurting profits in that?

Stuart, this is Dante Parrini. We made reference to increased energy and other raw material costs. We had higher fiber costs, and we also had some higher than our typical maintenance costs at the domestic facilities which support the specialty papers business unit.

Well, I can’t predict where energy and some of the energy related raw material prices are going to go. From a controllable point of view we certainly expect to bring the maintenance cost back into more normalized levels.

John, is it possible to talk at all about what type of modest kind of entitlement efforts you might be pursuing around the land sales? You mentioned that in the release.

Yes. Well, basically, you know, up until now people have come to us and wanted to buy our land as is, and you know they’re going to do things with that land that’s going to be worth a lot more when they’re done with it.

And so if you think about things like changing zoning or putting in sub plans, things that might take some time but the dollars aren’t that large, that’s the kind of thing we would do. I doubt very much that we would decide to go in and start building golf courses and shopping centers, but the value of just putting some entitlements on it can make land go up by quite a lot and doesn’t cost that much and doesn’t take that much time.

Okay. And then if you just work on sort of the per acre numbers, this translates to, it’s quite a bit lower than some of the HBU pieces you’ve been selling over the last two or three years. Any thoughts?

And some of the land is not as obvious HBU land as some of the land that we’ve sold, but I do think that we ended up having a lot more HBU acreage than we thought we would in the first place, so the overall value of this is one heck of a lot higher than we thought it would be. And, you know, as time goes by, I think there’s a very good chance that some of these acres tend to be worth more than we think they are.

Thank you. This does concludes today’s Glatfelter conference call. You may now disconnect your lines, and have a wonderful day.


Pennsylvania	001-03560	23-0628360
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

96 S. George Street, Suite 400, York, Pennsylvania		17401
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	P. H. Glatfelter Company

February 16, 2006	By:	John C. van Roden, Jr.

		Name: John C. van Roden, Jr.
		Title: Executive Vice President and Chief Financial Officer


Exhibit No.		Description

99.1		Press release issued by the Company to report its results of operations for the three months ended December 31, 2005.
99.2		Transcript of the Company's teleconference held on February 14, 2006 to discuss results of operations for the three months ended December 31, 2005.


For Immediate Release	Contacts:


	Investors:	Media:

	John C. van Roden	William T. Yanavitch

	(717) 225-2790	(717) 225-2760


Date of Report (Date of Earliest Event Reported):		February 14, 2006


Registrant’s telephone number, including area code:		717 225 4711